Asian tech sector hit as U.S. tightens semiconductor export curbs
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Asian equity markets faced renewed pressure midweek, with technology stocks leading losses after the U.S. administration announced a fresh round of restrictions on semiconductor exports to China. The move marks a significant escalation in the U.S.–China tech rivalry, targeting Nvidia’s H20 chips, which had been specifically engineered to comply with previous export control rules. Washington’s latest decision to require immediate licensing for exports of these processors has sent shockwaves through the tech sector, compounding geopolitical uncertainty and denting investor sentiment across Asia.
The impact was swift and widespread. The Hang Seng Tech Index plunged over 4% in Hong Kong trading, with Tencent and Alibaba down 2.3% and 4.2%, respectively. The selloff extended beyond China’s internet giants to regional semiconductor suppliers. Shares of South Korea’s SK Hynix fell 3.7%, while Taiwan Semiconductor Manufacturing Company (TSMC), the world’s largest chip foundry, lost 2.5%. This broad-based decline highlights the systemic sensitivity of the Asian tech supply chain to U.S. policy shifts, particularly in the AI and semiconductor sectors.
Nvidia, the global leader in AI chips, had designed the H20 chip for the Chinese market following restrictions imposed during the Biden administration. However, the U.S. Department of Commerce has now effectively rendered those efforts void by classifying the H20 under restricted items, citing national security risks and the strategic importance of AI capabilities. Nvidia has warned that the change will result in a charge of up to $5.5 billion in its fiscal Q1 results. Analysts at Wedbush framed the move as a clear message: the U.S. intends to halt China's AI momentum at the hardware level, even if that comes at a cost to American firms.
The decision comes amid heightened concern in Washington over China’s AI progress, particularly following the rapid ascent of startups like DeepSeek. Chinese firms had ramped up purchases of H20 chips in recent months in anticipation of such restrictions. Now, with Nvidia potentially off the table, Citi analysts suggest a shift toward domestic alternatives, notably Huawei’s Ascend series and Cambricon’s accelerators. In their view, China’s indigenous chip production capacity, though still maturing, is likely sufficient to absorb the redirected demand in the short-to-medium term.
This latest policy twist arrives just days after President Trump temporarily exempted semiconductor equipment and consumer electronics from his sweeping reciprocal tariffs on Chinese imports, which now stand at 145%. The juxtaposition of exemptions and targeted restrictions illustrates the complex and at times contradictory nature of current U.S. trade and industrial policy.
Looking ahead, investors will need to weigh the balance between geopolitical risk and strategic technological exposure in Asia. The immediate implications are bearish for supply chain players with high U.S. exposure or reliance on Nvidia sales in China. The longer-term concern remains the fragmentation of the global semiconductor market — and how that may reshape competitive dynamics, capital allocation, and R&D strategies across the industry. Monitoring future U.S. regulatory decisions, Chinese policy responses, and earnings guidance from impacted firms will be critical for navigating this evolving landscape.
The impact was swift and widespread. The Hang Seng Tech Index plunged over 4% in Hong Kong trading, with Tencent and Alibaba down 2.3% and 4.2%, respectively. The selloff extended beyond China’s internet giants to regional semiconductor suppliers. Shares of South Korea’s SK Hynix fell 3.7%, while Taiwan Semiconductor Manufacturing Company (TSMC), the world’s largest chip foundry, lost 2.5%. This broad-based decline highlights the systemic sensitivity of the Asian tech supply chain to U.S. policy shifts, particularly in the AI and semiconductor sectors.
Nvidia, the global leader in AI chips, had designed the H20 chip for the Chinese market following restrictions imposed during the Biden administration. However, the U.S. Department of Commerce has now effectively rendered those efforts void by classifying the H20 under restricted items, citing national security risks and the strategic importance of AI capabilities. Nvidia has warned that the change will result in a charge of up to $5.5 billion in its fiscal Q1 results. Analysts at Wedbush framed the move as a clear message: the U.S. intends to halt China's AI momentum at the hardware level, even if that comes at a cost to American firms.
The decision comes amid heightened concern in Washington over China’s AI progress, particularly following the rapid ascent of startups like DeepSeek. Chinese firms had ramped up purchases of H20 chips in recent months in anticipation of such restrictions. Now, with Nvidia potentially off the table, Citi analysts suggest a shift toward domestic alternatives, notably Huawei’s Ascend series and Cambricon’s accelerators. In their view, China’s indigenous chip production capacity, though still maturing, is likely sufficient to absorb the redirected demand in the short-to-medium term.
This latest policy twist arrives just days after President Trump temporarily exempted semiconductor equipment and consumer electronics from his sweeping reciprocal tariffs on Chinese imports, which now stand at 145%. The juxtaposition of exemptions and targeted restrictions illustrates the complex and at times contradictory nature of current U.S. trade and industrial policy.
Looking ahead, investors will need to weigh the balance between geopolitical risk and strategic technological exposure in Asia. The immediate implications are bearish for supply chain players with high U.S. exposure or reliance on Nvidia sales in China. The longer-term concern remains the fragmentation of the global semiconductor market — and how that may reshape competitive dynamics, capital allocation, and R&D strategies across the industry. Monitoring future U.S. regulatory decisions, Chinese policy responses, and earnings guidance from impacted firms will be critical for navigating this evolving landscape.